Quantitative easing: Difference between revisions
imported>Doug Williamson (Undo revision 38939 by Doug Williamson (talk)) |
(Mend link.) |
||
| (7 intermediate revisions by 2 users not shown) | |||
| Line 7: | Line 7: | ||
It involves a central bank buying financial assets, and its effect is to increase the money supply. | It involves a central bank buying financial assets, and its effect is to increase the money supply. | ||
It has the overall effect of printing electronic money. | |||
The financial assets bought are usually central government debt. | |||
The financial assets bought are usually central government debt, and also sometimes high-quality corporate bonds. | |||
''Theoretically'' this extra money will chase all the other assets, stimulating supply and driving up prices, increase confidence, encourage lending and activity in the real (non financial) economy. | |||
This boost is intended to lead to a self-perpetuating cycle of increasing activity. | |||
QE also serves to keep general interest rates lower, and hence borrowing rates lower which should encourage borrowing and investment. | |||
''In practice'' it does not always increase confidence and demand. | |||
More plentiful money, and cheaper borrowings, are not necessarily enough on their own to encourage businesses and individuals to increase spending, or encourage banks to lend more to higher-risk businesses. | |||
| Line 17: | Line 32: | ||
* [[Cash in the new post-crisis world]] | * [[Cash in the new post-crisis world]] | ||
* [[Central bank]] | * [[Central bank]] | ||
* [[Corporate bond]] | |||
* [[Debase]] | |||
* [[Easing]] | |||
* [[Fiscal policy]] | * [[Fiscal policy]] | ||
* [[Gilts]] | |||
* [[Helicopter money]] | * [[Helicopter money]] | ||
* [[Monetary policy]] | * [[Monetary policy]] | ||
* [[Money supply]] | * [[Money supply]] | ||
* [[POMO]] | * [[POMO]] | ||
* [[Quantitative tightening]] | |||
* [[QE2]] | * [[QE2]] | ||
* [[Real economy]] | |||
* [[Tightening]] | |||
[ | |||
[[Category:Long_term_funding]] | [[Category:Long_term_funding]] | ||
Latest revision as of 22:54, 28 February 2024
Monetary policy.
(QE).
Quantitative easing is a form of monetary policy used to stimulate an economy where interest rates are either at, or close to, zero.
It involves a central bank buying financial assets, and its effect is to increase the money supply.
It has the overall effect of printing electronic money.
The financial assets bought are usually central government debt, and also sometimes high-quality corporate bonds.
Theoretically this extra money will chase all the other assets, stimulating supply and driving up prices, increase confidence, encourage lending and activity in the real (non financial) economy.
This boost is intended to lead to a self-perpetuating cycle of increasing activity.
QE also serves to keep general interest rates lower, and hence borrowing rates lower which should encourage borrowing and investment.
In practice it does not always increase confidence and demand.
More plentiful money, and cheaper borrowings, are not necessarily enough on their own to encourage businesses and individuals to increase spending, or encourage banks to lend more to higher-risk businesses.
